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FirstGroup shareholders deliver early blow to new interim boss as Matthew Gregory bows out

Outgoing CEO Matthew Gregory
Outgoing CEO Matthew Gregory

FirstGroup shareholders delivered a big but, ultimately, symbolic thumbs-down to the re-election of chairman David Martin at the firm’s annual general meeting (AGM) today.

More than one-fifth (20.04) of the total investor votes cast opposed him staying on the board.

Mr Martin is now the Aberdeen-based transport giant’s interim executive chairman following the exit of chief executive Matthew Gregory, who has left the company after less than three years at the helm.

Interim executive chairman David Martin.

Two other members of the boardroom team, non-executive directors Warwick Brady and Julia Steyn, also attracted a rebuke from shareholders.

Mr Brady’s re-election was opposed by 20.29% of the total votes cast, while the opposition to Ms Steyn generated a protest of 18.03%.

FirstGroup’s pay awards for bosses were rejected by more than 4% of investors’ votes.

Shares rally despite AGM result

Other AGM resolutions attracting a significant rebellion included the normally uncontentious request by the firm to be allowed to “make political donations and incur political expenditure”, with 18.58% of the votes cast rejecting this.

FirstGroup’s shares were up more than 3% to 89.3p at market close, boosted by fresh details of how the company plans to distribute £500 million to investors following the £3.3 billion sale of two of its North American divisions.

The AGM has ushered in a new chapter for the firm following the departure of Mr Gregory.

He took the reins from Tim O’Toole – after a gap – in late 2018, following a spell as chief financial officer, becoming only the company’s third CEO since Sir Moir Lockhead led an employee-management buyout of Grampian Transport, in 1989, to found the firm.

Under pressure

Mr Gregory has quit the business to “move on to new opportunities”.

His decision to step down at today’s AGM was announced in late June and followed pressure on him to do so from New York-based hedge fund Coast Capital, which owns about 14% of FirstGroup.

Coast and other investors are unhappy over the sale of two US businesses, First Student and First Transit, believing the £3.3 billion deal has left them short-changed.

Shareholders showed their displeasure at a general meeting in May, when 38.7% of investor votes opposed the sale.

Mr Martin has taken on the CEO duties until a replacement for Mr Gregory is found.

My focus is on ensuring we continue to drive value from our strong positions in UK bus and rail.”

David Martin, executive chairman, FirstGroup.

In an AGM trading update, FirstGroup said a “comprehensive” search process was under way.

It also revealed passenger volumes for its First Bus operation in the UK, including First Aberdeen in its home city, have reached 65% of pre-pandemic levels, on average, in recent weeks.

The company added: “We expect this to increase further as the autumn terms for schools and then universities get fully under way.”

Evolving market

Mr Martin said overall trading was in line with bosses’ expectations, adding: “We continue to support our passengers and other stakeholders as travel patterns evolve.

“While we complete the search for a new chief executive, my focus is on ensuring we continue to drive value from our strong positions in UK bus and rail, progress our plans to resolve our non-core Greyhound operation and complete the return of value to our shareholders following the sale of the North American contract businesses.

“The vital role of public transport is clear and the policy backdrop has never been more supportive.

FirstGroup ‘well-placed to deliver returns

“With a well-capitalised balance sheet and an operating model that will support an attractive dividend for shareholders commencing in 2022, I am confident that FirstGroup is well-placed to deliver sustainable value creation as a focused UK public transport leader.”

FirstGroup is still trying to offload its iconic Greyhound intercity coach business in North America, which will leave it to focus on its bus and rail operations across the UK.

Will FirstGroup’s next CEO visit Aberdeen?

FirstGroup is the UK’s largest rail operator and second-biggest regional bus operator, carrying hundreds of thousands of passengers a day.

The 2019 AGM took place away from Aberdeen for the first time in the company’s history amid continued speculation over its long-term commitment to its home city.

Directors of the FTSE 250-listed group have few, if any, north-east links.

And during Mr Gregory’s time in the hotseat the company was evasive about how many times he had actually set foot in the Granite City.

FirstGroup also repeatedly turned down requests from The Press and Journal for an interview with Mr Gregory despite finding time for him to speak to London media.